A common expression in the investing community is that money never sleeps. That is especially true with blue-chip, dividend-paying stocks. With impressive brands and operations around the world, there are many businesses that are constantly making money with every passing minute.
As a dividend investor, it is my job to find the best of these businesses and add to them steadily over time. Here are two dividend payers in my portfolio that I anticipate will continue paying growing dividends for at least the next couple of decades.
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1. Genuine Parts: Old Reliable itself
Genuine Parts (GPC 1.05%) is one of the largest after-market auto parts retailers in the world. In the span of just over nine decades in business, the company has grown to 170 distribution centers and nearly 9,600 automotive parts stores globally. Aside from the brand power of the NAPA and Alliance Automotive Group brands, Genuine Parts also differentiates itself with a massive inventory of parts and well-informed, helpful staff.
Since the average age of vehicles in the U.S. is hanging around an all-time high of over 12 years, auto replacement parts have never been more important. This is because, with the shortage of new cars, customers need to service their used cars more frequently with costlier repairs to keep them on the road.
That's why analysts believe that Genuine Parts' non-GAAP (adjusted) diluted earnings per share (EPS) will grow by 4.6% annually over the next five years.
With a dividend payout ratio that clocks in around 43%, Genuine Parts should build on its 66-year dividend growth streak with mid-single-digit dividend hikes. Plus, the stock's 2.1% dividend yield is above the S&P 500 index's 1.7% payout, making Genuine Parts an attractive dividend growth stock.
Investors can snatch up shares of Genuine Parts at a forward price-to-earnings (P/E) ratio of 20.2. For context, this is meaningfully higher than the specialty retail industry average of 15.2. But if any business is deserving of a significant premium, Genuine Parts can certainly justify it.
2. A.O. Smith: Essential products for a modern economy
A.O. Smith (AOS 0.01%) sells hot water heaters and boilers to both residential customers and commercial customers. Thanks to leading water heater and water treatment brands such as the eponymous A.O. Smith, GSW, and Aquasana, the company has achieved 6% annual sales growth and 10% annual EPS growth over the last five years.
A.O. Smith's products are used residentially for bathing, cleaning, and cooking, and also by the food and beverage, chemical, hospital, and hotel industries. This is why Grand View Research expects that the global water heater market will grow 4.5% each year, from $28.1 billion in 2022 to $40 billion by 2030.
As A.O. Smith executes bolt-on acquisitions to build its market share, it's reasonable to conclude that mid-single-digit annual sales growth will persist. Along with profit margin expansion, this is why analysts are projecting the company will deliver 8% annual EPS growth through the next five years.
The stock's 2.1% dividend yield is quite attractive when paired with high-single-digit annual dividend growth potential. And with a dividend payout ratio of about 37%, this dividend is well-covered. This is why the company should have no difficulty extending its 31-year dividend growth streak moving forward.
Dividend growth investors can scoop up shares of A.O. Smith at a forward P/E ratio of just 17.9, below the specialty industrial machinery industry average of 19.1.
